"If Iran takes concrete steps and lives up to its obligations, there is a path towards a better relationship with the United States, increased integration for Iran within the international community, and a better future for all Iranians."

'Action needed'

Obama's address came after Iran agreed in talks with the so-called P5+1 group of nations - comprised of the US, Britain, France, Russia, China and Germany - that it would grant the International Atomic Energy Agency (IAEA) access to its nuclear facilities.

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Timeline: Iran's nuclear programme

The pledge by Tehran comes in the wake of an announcement by the US that it knew about a second nuclear site close to the Iranian city of Qom.

"Today's meeting [in Geneva] was a constructive beginning, but it must be followed with constructive action by the Iranian government," Obama said.

"Iran must demonstrate its commitment to transparency - earlier this month, we presented clear evidence that Iran has been building a covert nuclear facility in Qom.

"Since Iran has agreed now to co-operate fully and immediately with the International Atomic Energy Agency, it must grant unfettered access to IAEA inspectors within two weeks."

Obama welcomed Tehran's agreement in principle that it would allow its uranium to be turned into nuclear fuel by a third country, in line with an IAEA proposal.

"We support Iran's right to peaceful nuclear power. Taking the step of transferring its low-enriched uranium to a third country would be a positive step towards building confidence that Iran's programme is in fact peaceful," he said.

But the US president said that Tehran had to back up its promises to the P5+1 with action, adding that Washington would not wait for compliance for an indefinite period.

"Talk is no substitute for action; pledges of co-operation must be fulfilled. We have made it clear that we will do our part to engage the Iranian government on the basis of mutual interests and mutual respect, but that our patience is not unlimited."

Both sides 'weakened'

The meeting in Geneva on Wednesday between Iran and the five permanent members of the UN Security Council, plus Germany, was followed by a rare meeting between Iranian and US officials.

Satellite images show the second nucelar site near Qom  [AFP DIGITALGLOBE]
Abderrahim Foukara, the Washington bureau chief for Al Jazeera Arabic, said that the talks had been spurred on by the fact that Iran had sensed that the Obama administration had been weakened in the past few weeks.

"There is a sense that the Iranians feel that Obama has been wounded domestically, on the issue of healthcare reform, for example. There is a sense that he has been wounded in terms of his dealing with Israeli prime minister Binyamin Netanyahu. So, the Iranians see Obama's position as being weaker than it has been," he said.

However, Foukara added that the Obama administration had also come to the conclusion that some flaws in the Iranian government had been exposed of late, in regard to the country's widely criticised elections, as well as the US' discovery of the nuclear site at Qom.

"Both sides see each other as weakened," he said.

Marwan Bishara, Al Jazeera's senior political analyst, added that Iran had chosen the optimum opportunity to engage with the US on its own terms.

"The Iranians have an incredible sense of timing; they are almost like diplomatic predators," he said.

"There is a sense that the US is stuck in Afghanistan - it had to redeploy troops out of Iraq - it lost its leverage on Israel, and it has a huge domestic agenda to figure out.

"Hence, the Iranians are going into talks thinking 'this is the best timing ever'.

"The Obama adminsitration will now go in there with an open mind to the demand by the Iranians that negotiations take place on the basis of mutual respect and mutual interest - and not with sticks and carrots."